BILL NUMBER: AB 914 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 4, 2003
AMENDED IN SENATE AUGUST 18, 2003
AMENDED IN SENATE JULY 3, 2003
AMENDED IN ASSEMBLY JUNE 2, 2003
AMENDED IN ASSEMBLY MAY 13, 2003
AMENDED IN ASSEMBLY MAY 6, 2003
AMENDED IN ASSEMBLY APRIL 22, 2003
INTRODUCED BY Assembly Member Reyes
(Coauthor: Assembly Member Canciamilla)
(Coauthor: Senator Bowen)
FEBRUARY 20, 2003
An act to amend Sections 53100, 53103, 53104, 53105,
53106, 53108.1, 53108.5, 53109, 53112, 53113, 53114, 53114.2, 53115,
53115.3, 53116, and 53117 of, to add Section 53102.5 to, to repeal
Sections 53108, 53109.5, 53115.2, 53119, and 53120 of, and to repeal
and add Section 53107 of, the Government Code, and to amend Sections
41001, 41007, 41009, 41010, 41011, 41012, 41015, 41016, 41017, 41018,
41020, 41021, 41025, 41027, 41030, 41031, 41136, 41137, 41137.1,
41138, 41140, 41141, 41142, and 41150 of the Revenue and Taxation
Code, relating to public safety communications. An act
to add Article 5.6 (commencing with Section 848) to Chapter 4 of
Part 1 of Division 1 of the Public Utilities Code, relating to
electricity.
LEGISLATIVE COUNSEL'S DIGEST
AB 914, as amended, Reyes. Public safety communications
Electricity: financing energy recovery .
(1) Existing law establishes the California Infrastructure
and Economic Development Bank and authorizes the bank to make loans
and provide other assistance to public and private entities to carry
out various types of projects. The existing restructuring of the
electrical services industry provides for the issuance of rate
reduction bonds by the bank for the recovery of transition costs, as
defined, by electrical corporations.
This bill would authorize the Public Utilities Commission to issue
financing orders pursuant to the above provisions, to support the
issuance of energy recovery bonds by the bank, secured by a dedicated
rate component, for any electrical corporation that filed for
federal bankruptcy protection or for reorganization pursuant to
Chapter 11 of the Bankruptcy Code (11 U.S.C. Sec. 1101 et seq.)
prior to December 31, 2002. The bonds would only be issued as part
of a plan of reorganization endorsed by the commission to secure the
emergence of the corporation from bankruptcy protection or to
implement a confirmed plan, provided the commission finds that the
corporation's ratepayers will benefit from lower rates as a result of
the issuance of the bonds.
Since existing law makes any public utility, as defined, and any
corporation other than a public utility, that violates the Public
Utilities Act guilty of a crime, and the provisions of the bill would
be within the act, this bill would impose a state-mandated local
program by creating a new crime.
(2) The bill would declare that, due to the special circumstances
applicable only to the Pacific Gas and Electric Company bankruptcy, a
general statute cannot be made applicable within the meaning of
Section 16 of Article IV of the California Constitution, and the
enactment of a special statute is therefore necessary.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason. Existing law establishes
the Public Safety Communication Act of 2002.
The Warren 911 Emergency Assistance Act requires every local
public agency to establish a telephone service that automatically
connects a person dialing the digits 911 to an established public
safety answering point through normal telephone service facilities.
At the 911 public safety answering points serving an area where 5% or
more of the population speak a specific primary language other than
English, operators who speak each of these languages are required to
be on duty or available at all times for "911" emergency services.
The Communications Division within the Department of General Services
is required to coordinate the implementation of systems established
pursuant to the act and assist local public agencies and local public
safety agencies in obtaining financial help to establish emergency
telephone service.
This bill would revise and rename the act as the
Telecommunications Emergency Response System Act, and would, among
other things, rename the Communications Division within the
Department of General Services as the Telecommunications Division,
require the division to provide funding to local public agencies and
local public safety agencies to establish and maintain a system, and
require all public safety answering points to have access to
operators who speak other languages, in addition to English, at all
times for telecommunications emergency services.
The bill would eliminate statutory references to a 911 advisory
committee.
(2) The Emergency Telephone Users Surcharge Act requires any
person supplying intrastate telephone communication services, as
specified, in the state to collect a surcharge imposed on amounts
paid by every person in the state for intrastate telephone
communication service. It requires the Department of General
Services to annually determine a surcharge rate that it estimates
will produce sufficient revenue to fund the current fiscal year's
costs, but prohibits the surcharge rate in any year to be greater
than 3/4 of 1% nor less than 1/2 of 1%. It establishes the State
Emergency Telephone Number Account into which the payments made
pursuant to the act are deposited. It requires, upon appropriation,
funds in the account to pay, among other things, bills submitted to
the department by service suppliers or communications equipment
companies for the installation of, and ongoing expenses for,
specified communications services.
This bill would, among other things, revise and rename the act as
the Emergency Telecommunications Surcharge Act, require the surcharge
to be collected for intrastate telecommunications services, and
require the Department of General Services to annually determine a
surcharge rate that it estimates will produce sufficient revenue to
fund the current fiscal year's telecommunications emergency response
system costs. It would revise what expenses may be paid from the
Emergency Telephone Number Account, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 53100 of the Government Code is
SECTION 1. The Legislature finds and declares all of the
following:
(a) Pacific Gas and Electric Company (PG&E) has filed a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code
(11 U.S.C. Sec. 1101 et seq.) to obtain protection from its
creditors under the federal bankruptcy laws.
(b) PG&E filed a plan to reorganize and emerge from bankruptcy
that sought to strip the state of its ability to regulate many of the
company's assets and activities and transfers that jurisdiction to
the Federal Energy Regulatory Commission.
(c) PG&E and the Public Utilities Commission staff recently
proposed a settlement of the PG&E bankruptcy case and related
adversary proceedings that would retain state jurisdiction over PG&E'
s assets and activities and allow the company to regain investment
grade credit status. If approved by the commission, the proposed
settlement will cost PG&E ratepayers more than an additional five
billion dollars ($5,000,000,000), and ensure that PG&E rates for
electrical service remain far higher than rates for Southern
California Edison, for nine years.
(d) Evidence presented in commission Investigation No. 02-04-026
demonstrates that ratepayers could save over two billion dollars
($2,000,000,000) and still enable PG&E to emerge from bankruptcy,
through the use of a securitized financing backed by a dedicated rate
component.
(e) This form of financing was successfully used to fund the 10
percent rate reduction for residential and small commercial
customers, pursuant to Assembly Bill 1890 (Chapter 854 of the
Statutes of 1996) and Senate Bill 470 (Chapter 275 of the Statutes of
1997).
(f) The Legislature hereby finds and declares that the technical
terms and conditions established in Sections 840 to 847, inclusive,
of the Public Utilities Code were highly successful in allowing the
issuance of rate reduction bonds with a high credit rating and
favorable interest rates and that those technical terms and
conditions also allowed the bonds to withstand the PG&E bankruptcy
and the financial distress of Southern California Edison Company
without interruption of payments to bondholders or impairment of the
security for the bonds.
(g) It is the intent of the Legislature, and in the public
interest, that PG&E's emergence from bankruptcy be accomplished at
the lowest possible cost to the utility's ratepayers, without the
loss of state regulatory jurisdiction over the utility's assets and
activities.
(h) It is the further intent of the Legislature, and in the public
interest, to adopt those same technical terms and conditions for the
issuance of energy recovery bonds, modified only to the limited
extent necessary to reflect the particular circumstances for this
bond issuance, through the enactment of Article 5.6 (commencing with
Section 848) of Chapter 4 of Part 1 of Division 1 of the Public
Utilities Code.
(i) The Legislature finds and declares that, because of the unique
circumstances applicable only to the PG&E bankruptcy, a statute of
general applicability cannot be enacted within the meaning of
subdivision (b) of Section 16 of Article IV of the California
Constitution. Therefore, this special statute is necessary.
SEC. 2. Article 5.6 (commencing with Section 848) is added to
Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to
read:
Article 5.6. Financing Energy Recovery
848. The commission may, for any electrical corporation that
filed for federal bankruptcy protection or for reorganization
pursuant to Chapter 11 of the Bankruptcy Code (11 U.S.C. Sec. 1101 et
seq.) prior to December 31, 2002, issue financing orders pursuant to
Section 849 to support the issuance of energy recovery bonds secured
by a dedicated rate component as part of a plan of reorganization
endorsed by the commission to secure the emergence of the corporation
from bankruptcy protection or to implement a confirmed plan, so long
as the commission finds that the corporation's ratepayers will
benefit from lower rates as a result of the issuance of the bonds.
(b) The commission may, in a financing order issued pursuant to
this section, and consistent with procedural requirements of Section
1705, authorize the issuance of energy recovery bonds in the amount,
and in the manner, determined by the commission to provide the
maximum benefit to the corporation's ratepayers in the context of a
commission-endorsed plan of reorganization for the electrical
corporation.
(c) Any commission-endorsed plan of reorganization shall provide
for the dismissal of all pending federal court litigation brought by
the electrical corporation against the commission or any other agency
or official of the State of California for violation of the filed
rate doctrine, for a taking of property, for impairment of the
obligations of contract, or any related claims. No financing order
shall be effective unless the dismissal is approved by the bankruptcy
court, prior to confirmation of the plan of reorganization, or as
part of the confirmed plan of reorganization.
(d) In confirming the commission's authority to approve a
dedicated rate component to support the issuance of energy recovery
bonds, the Legislature is not ratifying or endorsing any particular
outcome of the federal bankruptcy proceeding, but rather is
authorizing a means by which the commission can reduce ratepayer
costs in a plan of reorganization.
849. For the purposes of this article, the following terms shall
have the following meanings:
(a) "Bank" means the California Infrastructure and Economic
Development Bank.
(b) "Financing entity" means the bank, any special purpose trust,
as defined in Section 63010 of the Government Code, that is
authorized by the bank to issue energy recovery bonds or acquire
energy recovery property, or any other entity authorized by the bank
to issue energy recovery bonds or acquire energy recovery property,
or both. The bank may authorize an entity other than a special
purpose trust, as defined in Section 63010 of the Government Code, to
issue energy recovery bonds only if all of the following conditions
are met:
(1) The bank by resolution has determined that allowing another
entity to issue energy recovery bonds would produce greater overall
ratepayer savings, taking into account all relevant considerations,
including, but not limited to, the exclusion of interest on energy
recovery bonds issued by the bank from investors' gross income for
California or federal income tax purposes, or both, earnings on funds
collected and held by the electrical corporation prior to deposit in
a fund or account for the benefit of holders of energy recovery
bonds, and all costs of issuance and other transaction costs.
(2) The bank submits to the Joint Legislative Budget Committee a
certified copy of the bank's resolution, together with a report
setting forth the basis for the bank's determination that a financing
entity other than the bank or a special purpose trust will produce
greater ratepayer savings and at least 30 days have elapsed from the
date of submission.
(c) "Financing order" shall mean an order of the commission
adopted in accordance with this article, which shall include, without
limitation, a procedure to require the expeditious approval by the
commission of periodic adjustments to fixed energy recovery amounts
included therein to ensure recovery of all energy recovery costs and
the costs of capital associated with the proposed provision,
recovery, financing, or refinancing thereof, including the costs of
issuing, servicing, and retiring the energy recovery bonds
contemplated by the financing order.
(d) "Fixed energy recovery amounts" means those nonbypassable
rates and other charges, including, but not limited to, distribution,
connection, disconnection, and termination rates and charges, that
are authorized by the commission in a financing order to recover (1)
energy recovery costs, and (2) the costs of providing, recovering,
financing, or refinancing the energy recovery costs through a plan
approved by the commission in the financing order, including the
costs of issuing, servicing, and retiring energy recovery bonds.
Fixed energy recovery amounts may, if approved by the commission,
include nonbypassable rates and other charges to recover federal and
state taxes whose recovery period is modified by the transactions
approved in the financing order.
(e) "Energy recovery bonds" means bonds, notes, certificates of
participation or beneficial interest, or other evidences of
indebtedness or ownership, issued pursuant to an executed indenture
or other agreement of a financing entity, the proceeds of which are
used, directly or indirectly, to provide, recover, finance, or
refinance energy recovery costs, and that are directly or indirectly
secured by, or payable from, energy recovery property.
(f) "Energy recovery costs" means those costs, and categories of
costs, that the commission finds to be reasonably and necessarily
incurred in order for an electrical corporation described in Section
848 to regain its financial health, and that the commission approves
for recovery by the electrical corporation as part of a bankruptcy
plan of reorganization for that electrical corporation.
(g) (1) "Energy recovery property" means the property right
created pursuant to this article including, without limitation, the
right, title, and interest of an electrical corporation or its
transferee:
(A) In and to the tariff established pursuant to a financing
order, as adjusted from time to time in accordance with subdivision
(c) of Section 849.1 and the financing order.
(B) To be paid the amount that is determined in a financing order
to be the amount that the electrical corporation or its transferee is
lawfully entitled to receive pursuant to the provision of this
article and the proceeds thereof, and in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from
the tariff or constituting fixed energy recovery amounts that are the
subject of a financing order including those nonbypassable rates and
other charges referred to in subdivision (d).
(C) In and to all rights to obtain adjustments to the tariff
pursuant to the terms of subdivision (c) of Section 849.1 and the
financing order.
(2) "Energy recovery property" shall constitute a current property
right notwithstanding the fact that the value of the property right
will depend on consumers using electricity or, in those instances
where consumers are customers of a particular electrical corporation,
the electrical corporation performing certain services.
(3) For purposes of Sections 63010 and 63025.1 of the Government
Code, "energy recovery property" also shall mean certificates
representing primarily interests in the property rights described in
paragraphs (1) and (2).
849.1. (a) The commission may, in an investigation instituted on
its own motion or in response to an application, determine that an
electrical corporation described in Section 848 may recover certain
energy recovery costs through fixed energy recovery amounts, which is
energy recovery property under this article. The commission shall
designate fixed energy recovery amounts as recoverable in one or more
financing orders if the commission determines, as part of its
findings in connection with the financing order, that the designation
of the fixed energy recovery amounts, and issuance of energy
recovery bonds in connection with some or all of the fixed energy
recovery amounts would reduce the rates that the electrical
corporation's customers would have paid if the financing order were
not adopted. Customers of the electrical corporation, including
direct access customers, and departing load customers as defined by
the commission, shall continue to pay fixed energy recovery amounts
until the bonds are paid in full by the financing entity. Once the
bonds have been paid in full, the payment by customers of fixed
energy recovery amounts shall terminate.
(b) The commission may issue financing orders in accordance with
this article to facilitate the provision, recovery, financing, or
refinancing of energy recovery costs. A financing order may specify
how amounts collected from a customer shall be allocated between
fixed energy recovery amounts and other charges.
(c) Notwithstanding Section 455.5, Section 1708, or any other
provision of law, except as otherwise provided in this subdivision
with respect to energy recovery property that has been made the basis
for the issuance of energy recovery bonds, the financing orders and
the fixed energy recovery amounts shall be irrevocable and the
commission shall not have authority either by rescinding, altering,
or amending the financing order or otherwise, to revalue or revise
for ratemaking purposes the costs of recovering, financing, or
refinancing the energy recovery costs, determine that the fixed
energy recovery amounts or rates are unjust or unreasonable, or in
any way reduce or impair the value of energy recovery property; nor
shall the amount of revenues arising with respect thereto be subject
to reduction, impairment, postponement, or termination. Except as
otherwise provided in this subdivision, the State of California does
hereby pledge and agree with the owners of energy recovery property
and holders of energy recovery bonds that the state shall neither
limit nor alter the fixed energy recovery amounts, energy recovery
property, financing orders, and all rights thereunder until the
obligations, together with the interest thereon, are fully met and
discharged, provided nothing contained in this section shall preclude
the limitation or alteration if and when adequate provision shall be
made by law for the protection of the owners and holders. The bank
as agent for the state is authorized to include this pledge and
undertaking for the state in these obligations. Notwithstanding any
other provision of this section, the commission shall approve the
adjustments to the fixed energy recovery amounts as may be necessary
to ensure timely recovery of all energy recovery costs that are the
subject of the pertinent financing order, and the costs of capital
associated with the provision, recovery, financing, or refinancing
thereof, including the costs of issuing, servicing, and retiring the
energy recovery bonds contemplated by the financing order.
(d) (1) Financing orders issued under this article do not
constitute a debt or liability of the state or of any political
subdivision thereof, other than the financing entity, and do not
constitute a pledge of the full faith and credit of the state or any
of its political subdivisions, other than the financing entity, but
are payable solely from the funds provided therefore under this
article and shall be consistent with Sections 1 and 18 of Article XVI
of the California Constitution. This subdivision shall in no way
preclude bond guarantees or enhancements pursuant to this article.
All the bonds shall contain on the face thereof a statement to the
following effect: "Neither the full faith and credit nor the taxing
power of the State of California is pledged to the payment of the
principal of, or interest on, this bond."
(2) The issuance of bonds under this article shall not directly,
indirectly, or contingently obligate the state or any political
subdivision thereof to levy or to pledge any form of taxation
therefore or to make any appropriation for their payment. Nothing in
this section shall prevent, or be construed to prevent, the
financing entity from pledging the full faith and credit of the
infrastructure bank fund to the payment of bonds or issuance of bonds
authorized pursuant to this article.
(e) The commission shall provide in any financing order for a
procedure for the expeditious approval by the commission of periodic
adjustments to the fixed energy recovery amounts that are the subject
of the pertinent financing order, as required by subdivision (c).
The procedure shall require the commission to determine whether the
adjustments are required on each anniversary of the issuance of the
financing order, and at the additional intervals as may be provided
for in the financing order, and for the adjustments, if required, to
be approved within 90 days of each anniversary of the issuance of the
financing order, or of each additional interval provided for in the
financing order.
(f) Fixed energy recovery amounts shall constitute energy recovery
property when, and to the extent that, a financing order authorizing
the fixed energy recovery amounts has become effective in accordance
with this article, and the energy recovery property shall thereafter
continuously exist as property for all purposes with all of the
rights and privileges of this article for the period and to the
extent provided in the financing order, but in any event until the
energy recovery bonds are paid in full, including all principal,
interest, premium, costs, and arrearages thereon.
(g) Any surplus fixed energy recovery amounts in excess of the
amounts necessary to pay principal, premium, if any, interest and
expenses of the issuance of the energy recovery bonds shall be
remitted to the financing entity and may be used to benefit the
electrical corporation's customers if this would not result in a
recharacterization of the tax, accounting, and other intended
characteristics of the financing, including, but not limited to, the
following:
(1) Avoiding the recognition of debt on the electrical corporation'
s balance sheet for financial accounting and regulatory purposes.
(2) Treating the energy recovery bonds as debt of the electrical
corporation or its affiliates for federal income tax purposes.
(3) Treating the transfer of the energy recovery property by the
electrical corporation as a true sale for bankruptcy purposes.
(4) Avoiding any adverse impact of the financing on the electrical
corporation's credit rating.
849.2. (a) Financing entities may issue energy recovery bonds
upon approval by the commission in the pertinent financing orders.
Energy recovery bonds shall be nonrecourse to the credit or any
assets of the electrical corporation, other than the financial
recovery property as specified in the pertinent financing order.
(b) Electrical corporations may sell and assign all or portions of
their interest in energy recovery property to an affiliate.
Electrical corporations or their affiliates may sell or assign their
interests to one or more financing entities that make that property
the basis for issuance of energy recovery bonds to the extent
approved in the pertinent financing orders. Electrical corporations,
their affiliates, or financing entities may pledge energy recovery
property as collateral, directly or indirectly, for energy recovery
bonds to the extent approved in the pertinent financing orders
providing for a security interest in the energy recovery property, in
the manner as set forth in Section 849.3. In addition energy
recovery property may be sold or assigned by (1) the financing entity
or a trustee for the holders of energy recovery bonds in connection
with the exercise of remedies upon a default, or (2) any person
acquiring the energy recovery property after a sale or assignment
pursuant to this subdivision.
(c) To the extent that any interest in energy recovery property is
so sold or assigned, or is so pledged as collateral, the commission
shall authorize the electrical corporation to contract with the
financing entity that it will continue to operate its system to
provide service to its customers, will collect amounts in respect of
the fixed energy recovery amounts for the benefit and account of the
financing entity, and will account for and remit these amounts to or
for the account of the financing entity. Contracting with the
financing entity in accordance with that authorization shall not
impair or negate the characterization of the sale, assignment, or
pledge as an absolute transfer, a true sale, or security interest, as
applicable.
(d) Notwithstanding Section 1708 or any other provision of law,
any requirement under this article or a financing order that the
commission take action with respect to the subject matter of a
financing order shall be binding upon the commission, as it may be
constituted from time to time, and any successor agency exercising
functions similar to the commission and the commission shall have no
authority to rescind, alter, or amend that requirement in a financing
order. The approval by the commission in a financing order of the
issuance by an electrical corporation or a financing entity of energy
recovery bonds shall include the approvals, if any, as may be
required by Article 5 (commencing with Section 816) and Section
701.5. Nothing in Section 701.5 shall be construed to prohibit the
issuance of energy recovery bonds upon the terms and conditions as
may be approved by the commission in a financing order. Section 851
shall not be applicable to the transfer or pledge of energy recovery
property, the issuance of energy recovery bonds, or related
transactions approved in a financing order.
849.3. (a) A security interest in energy recovery property is
valid, is enforceable against the pledgor and third parties, subject
to the rights of any third parties holding security interests in the
energy recovery property perfected in the manner described in this
section, and attaches when all of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed energy recovery amounts included in the energy recovery
property.
(2) Value has been given by the pledgees of the energy recovery
property.
(3) The pledgor has signed a security agreement covering the
energy recovery property.
(b) A valid and enforceable security interest in energy recovery
property is perfected when it has attached and when a financing
statement has been filed in accordance with Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code naming the
pledgor of the energy recovery property as "debtor" and identifying
the energy recovery property. Any description of the energy recovery
property shall be sufficient if it refers to the financing order
creating the energy recovery property. A copy of the financing
statement shall be filed with the commission by the electrical
corporation that is the pledgor or transferor of the energy recovery
property, and the commission may require the electrical corporation
to make other filings with respect to the security interest in
accordance with procedures it may establish, provided that the
filings shall not affect the perfection of the security interest.
(c) A perfected security interest in energy recovery property is a
continuously perfected security interest in all revenues and
proceeds arising with respect thereto, whether or not the revenues or
proceeds have accrued. Conflicting security interests shall rank
according to priority in time of perfection. Energy recovery
property shall constitute property for all purposes, including for
contracts securing energy
recovery bonds, whether or not the revenues and proceeds arising with
respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the
energy recovery property and the rights of any third parties holding
security interests in the energy recovery property perfected in the
manner described in this section, the validity and relative priority
of a security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the energy recovery property with other funds of the
electrical corporation that is the pledgor or transferor of the
energy recovery property, or by any security interest in a deposit
account of that electrical corporation perfected under Division 9
(commencing with Section 9101) of the Commercial Code into which the
revenues are deposited. Subject to the terms of the security
agreement, upon compliance with the requirements of Section 9311 of
the Commercial Code, the pledgees of the energy recovery property
shall have a perfected security interest in all cash and deposit
accounts of the electrical corporation in which revenues arising with
respect to the energy recovery property have been commingled with
other funds, but the perfected security interest shall be limited to
an amount not greater than the amount of the revenues with respect to
the energy recovery property received by the electrical corporation
within 12 months before (1) any default under the security agreement
or (2) the institution of insolvency proceedings by or against the
electrical corporation, less payments from the revenues to the
pledgees during that 12-month period.
(e) If an event of default occurs under the security agreement
covering the energy recovery property, the pledgees of the energy
recovery property, subject to the terms of the security agreement,
shall have all rights and remedies of a secured party upon default
under Division 9 (commencing with Section 9101) of the Commercial
Code, and shall be entitled to foreclose or otherwise enforce their
security interest in the energy recovery property, subject to the
rights of any third parties holding prior security interests in the
energy recovery property perfected in the manner provided in this
section. In addition, the commission may require, in the financing
order creating the energy recovery property, that, in the event of
default by the electrical corporation in payment of revenues arising
with respect to the energy recovery property, the commission and any
successor thereto, upon the application by the pledgees or
transferees, including transferees under Section 849.4, of the energy
recovery property, and without limiting any other remedies available
to the pledgees or transferees by reason of the default, shall order
the sequestration and payment to the pledgees or transferees of
revenues arising with respect to the energy recovery property. Any
order shall remain in full force and effect notwithstanding any
bankruptcy, reorganization, or other insolvency proceedings with
respect to the debtor, pledgor, or transferor of the energy recovery
property. Any surplus in excess of amounts necessary to pay
principal, premium, if any, interest, costs, and arrearages on the
energy recovery bonds, and other costs arising under the security
agreement, shall be remitted to the debtor or to the pledgor or
transferor.
(f) Section 5451 of the Government Code shall not apply to any
pledge of energy recovery property by a financing entity. Sections
9204 and 9205 of the Commercial Code shall apply to a pledge of
energy recovery property by an electrical corporation, an affiliate
of an electrical corporation, or a financing entity.
(g) This section sets forth the terms by which a consensual
security interest can be created and perfected in the energy recovery
property. Unless otherwise ordered by the commission with respect
to any series of energy recovery bonds on or prior to the issuance of
the series, there shall exist a statutory lien as provided in this
subdivision. Upon the effective date of the financing order, there
shall exist a first priority lien on all energy recovery property
then existing or thereafter arising pursuant to the terms of the
financing order. This lien shall arise by operation of this section
automatically without any action on the part of the electrical
corporation, any affiliate thereof, the financing entity, or any
other person. This lien shall secure all obligations, then existing
or subsequently arising, to the holders of the energy recovery bonds
issued pursuant to the financing order, the trustee or representative
for the holders, and any other entity specified in the financing
order. The persons for whose benefit this lien is established shall,
upon the occurrence of any defaults specified in the financing
order, have all rights and remedies of a secured party upon default
under Division 9 (commencing with Section 9101) of the Commercial
Code, and shall be entitled to foreclose or otherwise enforce this
statutory lien in the energy recovery property. This lien shall
attach to the energy recovery property regardless of who shall own,
or shall subsequently be determined to own, the energy recovery
property including any electrical corporation, any affiliate thereof,
the financing entity, or any other person. This lien shall be
valid, perfected, and enforceable against the owner of the energy
recovery property and all third parties upon the effectiveness of the
financing order without any further public notice; provided,
however, that any person may, but shall not be required to, file a
financing statement in accordance with subdivision (b). Financing
statements so filed may be "protective filings" and shall not be
evidence of the ownership of the energy recovery property.
A perfected statutory lien in energy recovery property is a
continuously perfected lien in all revenues and proceeds arising with
respect thereto, whether or not the revenues or proceeds have
accrued. Conflicting liens shall rank according to priority in time
of perfection. Energy recovery property shall constitute property
for all purposes, including for contracts securing energy recovery
bonds, whether or not the revenues and proceeds arising with respect
thereto have accrued.
In addition, the commission may require, in the financing order
creating the energy recovery property, that, in the event of default
by the electrical corporation in payment of revenues arising with
respect to energy recovery property, the commission and any successor
thereto, upon the application by the beneficiaries of the statutory
lien, and without limiting any other remedies available to the
beneficiaries by reason of the default, shall order the sequestration
and payment to the beneficiaries of revenues arising with respect to
the energy recovery property. Any order shall remain in full force
and effect notwithstanding any bankruptcy, reorganization, or other
insolvency proceedings with respect to the debtor, pledgor, or
transferor of the energy recovery property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest,
costs, and arrearages on the energy recovery bonds, and other costs
arising in connection with the documents governing the energy
recovery bonds, shall be remitted to the debtor or to the pledgor or
transferor.
849.4. (a) A transfer of energy recovery property by an
electrical corporation to an affiliate or to a financing entity, or
by an affiliate of an electrical corporation or a financing entity to
another financing entity, which the parties have in the governing
documentation expressly stated to be a sale or other absolute
transfer, in a transaction approved in a financing order, shall be
treated as an absolute transfer of all of the transferor's right,
title, and interest (as in a true sale), and not as a pledge or other
financing, of the energy recovery property, other than for federal
and state income and franchise tax purposes. Granting to holders of
energy recovery bonds a preferred right to revenues of the electrical
corporation, or the provision by the company of other credit
enhancement with respect to energy recovery bonds, shall not impair
or negate the characterization of any transfer as a true sale, other
than for federal and state income and franchise tax purposes.
(b) A transfer of energy recovery property shall be deemed
perfected as against third persons when both of the following have
taken place:
(1) The commission has issued the financing order authorizing the
fixed energy recovery amounts included in the energy recovery
property.
(2) An assignment of the energy recovery property in writing has
been executed and delivered to the transferee.
(c) As between bona fide assignees of the same right for value
without notice, the assignee first filing a financing statement in
accordance with Chapter 5 (commencing with Section 9501) of Division
9 of the Commercial Code naming the assignor of the energy recovery
property as debtor and identifying the energy recovery property has
priority. Any description of the energy recovery property shall be
sufficient if it refers to the financing order creating the energy
recovery property. A copy of the financing statement shall be filed
by the assignee with the commission, and the commission may require
the assignor or the assignee to make other filings with respect to
the transfer in accordance with procedures it may establish, but
these filings shall not affect the perfection of the transfer.
849.5. Any successor to the electrical corporation, whether
pursuant to any bankruptcy, reorganization, or other insolvency
proceeding, or pursuant to any merger, sale, or transfer, by
operation of law, or otherwise, shall perform and satisfy all
obligations of the electrical corporation pursuant to this article in
the same manner and to the same extent as the electrical
corporation, including, but not limited to, collecting and paying to
the holders of energy recovery bonds or their representatives or the
applicable financing entity revenues arising with respect to the
energy recovery property sold to the applicable financing entity or
pledged to secure energy recovery bonds.
849.6. The authority of the commission to issue financing orders
pursuant to Section 849.1 shall expire on December 31, 2005. The
expiration of the authority shall have no effect upon financing
orders adopted by the commission pursuant to this article or any
energy recovery property arising therefrom, or upon the charges
authorized to be levied thereunder, or the rights, interests, and
obligations of the electrical corporation or a financing entity or
holders of energy recovery bonds pursuant to the financing order, or
the authority of the commission to monitor, supervise, or take
further action with respect to the order in accordance with the terms
of this article and of the order.
849.7. Notwithstanding any other law, regulations adopted to
implement this article shall not be subject to the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code).
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution. _____________________________________ All
matter omitted in this version of the bill appears in the bill as
amended in the Senate August 18, 2003 (JR 11)
____________________________________